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No. CIV 93-7112 TUC ACM (D. Ariz.), filed 1993;
Grijalva v. Shalala, No. 97-15877 (9th Cir.), appeal filed by defendant 1997;
Shalala v. Grijalva, No. 98-1284 (S.Ct.), petition for cert. filed by defendant 

Final Update: October 30, 2003

Issue: Whether the Secretary of HHS failed to ensure that HMOs provided appropriate notice and hearing rights to patients whose services were cut back or terminated.

Relief Sought: Nationwide class alleged. Declaratory and injunctive relief to ensure that those rights were provided.

Status: On April 4, 2003 the lawsuit entered its final stage when the Centers for Medicare & Medicaid Services published final regulations establishing a new "fast track" appeal process for enrollees in managed care organizations (MCOs).

Many other improvements in the Medicare managed care process have occurred since the lawsuit was filed. In March, 1996 a judgment was issued in favor of enrollees by U.S. District Judge Alfredo C. Marquez. He ordered the HCFA to require its contracting HMOs to provide improved notices and expedited appeals procedures to Medicare beneficiaries. Grijalva v. Shalala, 946 F.Supp. 747 (D.Ariz. 1996).

The Medicare administration immediately implemented certain improvements in its managed care appeal procedures, including better written notice to beneficiaries of denial decisions and expedited appeal procedures. Not long afterwards these beneficiary notice and appeal procedures were further strengthened by Congress in the Balanced Budget Act of 1997.

Meanwhile, the Medicare administration appealed Judge Marquez’s decision to the Ninth Circuit Court of Appeals, which affirmed the favorable ruling by the district court. 152 F.3d 1115 (9th Cir. 1998). The government further appealed to the United States Supreme Court, which vacated the decision and remanded the case for reconsideration of whether denials of coverage made by a contracting MCO are "state action" subject to the protections of the Constitution. 119 S.Ct. 1573 (1999).

On remand, the plaintiffs and the Medicare agency reached agreement on additional changes in the notice and appeals procedures for Medicare HMOs that resolved remaining issues concerning pretermination appeal rights. The Settlement Agreement would establish a new, fast track appeal while benefits continue for those receiving nursing facility, home health, or Comprehensive Outpatient Rehabilitation Facility (CORF) benefits. (A similar process for continuation of benefits during an expedited appeal was already available for hospital patients.) Fast track would be triggered by a written notice to the enrollee that would explain the reasons for termination of services and how the enrollee could initiate a fast track appeal. The notice was to be given to the enrollee 4 days before the date upon which the provider or the managed care organization believed that Medicare coverage should terminate. If the beneficiary appealed by noon of the day following receipt of the notice, an Independent Review Entity would make a decision about whether the termination was appropriate under Medicare program rules. The IRE would be required under the terms of the Settlement Agreement to contact the beneficiary to learn his position as well as that of the provider or MCO.

The Medicare administration published proposed rules to establish the fast track appeals process agreed to in the Settlement Agreement on January 24, 2001, shortly after the change of administration. Under the terms of the Settlement Agreement, all claims would be dismissed 30 days after promulgation of a Final Rule, but no later than December 31, 2002. When no Final Rule had been published by that date, plaintiffs went back to court. Finally, on April 4, 2003 the Final Regulation appeared in the Federal Register. Although the Final Regulation still establishes a Fast Track appeal procedure with a number of good features, it has been rewritten to dilute some of the agreed upon protections for beneficiaries.

The Final Regulations adopt the following procedures, which are compared to the provisions in the Settlement Agreement and Proposed regulations:

  • Hospital Provisions:

    The final regulations withdraw an earlier regulation at 42 C.F.R. § 422.620 that required written notice of appeal rights be given to Medicare beneficiaries one day before discharge. Grijalva plaintiffs had relied on the earlier regulation and therefore made no specific provision for hospital patients. The new regulations also require that written notice be given by the MCO rather than the hospital, and only when the patient disagrees with the discharge. When that happens, the attending physician must concur in the discharge decision. 42 C.F.R. §§ 422.620, 422.624.

  • Nursing Facility, Home Health Agency and CORF Provisions:

    Notice.  The final regulations remove the requirement that a detailed written notice of the reasons for termination of services be given. Instead a very brief written notice must be given, which informs the beneficiary that s/he can get a more detailed notice upon request for appeal. 42 C.F.R. § 422.624(b)(iii). The notice is given not 4 days before the proposed end of services, as the Proposed Regulations required, but only 2 days before termination.

    Fast Track Appeal.  Pretermination appeal to an Independent Review Entity (IRE) is provided. There is a very compressed timetable that plays out as follows in a hypothetical case:
    Monday – MCO gives Beneficiary brief written notice. S/he can request fast track today or tomorrow.
    Tuesday – Beneficiary requests Fast Track appeal. On same day IRE must notify MCO, MCO must give detailed notice to Beneficiary, and MCO must send IRE information to support denial. The burden of proof is on the MCO to provide adequate information to justify termination. 42 C.F.R. § 422.626(c).
    Wednesday – If requested by the Beneficiary, IRE gives information from MCO to Beneficiary. IRE must ask the Beneficiary for her side of the story. This is the last day of Beneficiary’s coverage unless the MCO did not get information in fast enough or the IRE finds the MCO did not give valid notice.
    Thursday – IRE must make decision and notify Beneficiary. This last day would have been on Wednesday if the Beneficiary had requested appeal on Monday or had not requested information from the IRE. If the IRE decides against the Beneficiary on Thursday, she will be liable for services received on this day. 42 C.F.R. § 422.626(b)

With the settlement fully implemented, the district court dismissed the complaint on September 25, 2003, about ten years after it had been filed.

The Grijalva case concerns the failure of the Centers for Medicare & Medicaid Services to implement and enforce proper due process protections for Medicare HMO appeals.  For more information contact Center Attorney Sally Hart, (520) 327-9547. 

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